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    Lucid Group Inc (LCID)

    Business Description

    Lucid Group, Inc. (LCID) is a company specializing in the design, engineering, and manufacturing of high-performance electric vehicles (EVs) and advanced powertrain components. The company is committed to innovation in the EV industry, focusing on delivering luxury electric vehicles and cutting-edge technology. In addition to vehicle sales, Lucid engages in research and development, manufacturing, and retail expansion to support its global operations.

    1. Vehicle Sales - Sells high-performance electric vehicles, including the Lucid Air, with revenue recognized upon delivery to customers.
    2. Non-Warranty After-Sales Vehicle Services and Parts - Provides vehicle services and parts not covered under warranty.
    3. Powertrain Kits and Retail Merchandise - Offers advanced powertrain kits and branded retail merchandise.
    4. Regulatory Credits - Generates revenue through the sale of regulatory credits.
    5. Vehicle Operating Lease Revenue - Includes sales of vehicles with repurchase obligations, accounted for as operating leases, though this revenue is not material.

    Q3 2024 Summary

    Initial Price$2.65July 1, 2024
    Final Price$3.26October 1, 2024
    Price Change$0.61
    % Change+23.02%

    What went well

    • Significant improvements in gross margin due to cost reduction initiatives, with GAAP gross margin improving 28 percentage points sequentially. The company is seeing a positive trend across the board in BOM cost, logistics cost, and operational efficiency, leading to better vehicle profitability.
    • Strong demand anticipated for the Lucid Gravity SUV, with the company expecting to be manufacturing constrained rather than market constrained during the ramp-up. The Grand Touring model starts at $94,900 with over 440 miles of range and 828-horsepower, indicating robust market potential.
    • Strategic expansion into the midsize vehicle segment, with a new Midsize platform scheduled for start of production in late 2026, targeting a market approximately 30x larger than last year's. This move aims to achieve significant scale and drive long-term growth.

    What went wrong

    • Lucid Group continues to rely on significant capital raises to fund its operations and expansion plans, which could lead to dilution of existing shareholders. In October, the company raised approximately $1.75 billion through a public offering and investment from the Public Investment Fund (PIF). This indicates that the company is not yet self-sustaining financially and may need further funding in the future.
    • Uncertainty regarding future working capital requirements and lack of specific guidance raises concerns about the company's ability to efficiently manage its cash as it ramps up production of new models like the Lucid Gravity and plans for the Midsize vehicle. When asked about the working capital implications for next year, management deferred providing details, stating they will provide more color during the Q4 guidance.
    • No concrete technology licensing agreements have been announced, despite the company's emphasis on this as a revenue source. CEO Peter Rawlinson stated they are actively engaged in discussions but could not announce any binding agreements yet. This may indicate challenges in monetizing their technology portfolio and generating additional revenue streams.

    Q&A Summary

    1. Financial Runway and Capital Raise
      Q: How did you decide when to raise capital given your needs?
      A: We recently raised nearly $1.75 billion, securing our financial runway well into 2026, which takes us past the start and ramp-up of the Gravity. In 2024, we've raised over $4 billion despite a tough market, demonstrating the value of our technology. The Public Investment Fund (PIF) participated pro rata, showing strong commitment to Lucid.

    2. Gross Margin Impact of Gravity Ramp-Up
      Q: How will the Gravity production ramp affect gross margins?
      A: Applying our learnings from the Air to the Gravity, we're confident that Gravity will drive further scale and cost reductions. We're on the right trajectory from a cost perspective, and although we aren't providing specific guidance yet, we expect improved gross margins as we ramp up Gravity production.

    3. Cost Reductions and Gross Margin Improvements
      Q: Are underlying vehicle profitability and cost efficiencies improving?
      A: Yes, our underlying vehicle profitability is improving as our cost reductions take effect. Our gross margin improved by 28 percentage points sequentially. Excluding one-time warranty costs, we still saw an 11 percentage point improvement. We're seeing benefits across bill of materials, logistics, and operational efficiency.

    4. Plans and Timing for Midsize Vehicle
      Q: What is the status of the Midsize vehicle development?
      A: We've already started on the Midsize vehicle, with a large portion of our engineering team working on it. The factory in Saudi Arabia is under construction, aiming for a start of production in late 2026. The Midsize is a key step in scaling up our operations.

    5. Demand and Market Constraints for Gravity vs. Air
      Q: How do you anticipate demand and constraints for Gravity compared to Air?
      A: We believe there's huge latent demand for the Gravity Grand Touring. While we've been market constrained with the Air, we anticipate being manufacturing constrained with Gravity next year due to our focus on ramp-up quality. We'll transition to the Gravity Touring model, starting at $79,900, later in 2025.

    6. Saudi Arabia Agreement Deliveries
      Q: Will the Gravity ramp-up increase deliveries to Saudi Arabia?
      A: We expect a natural distribution of deliveries to Saudi Arabia, with the Gravity being a perfect fit for the region. Some early Gravity builds will head to the Kingdom of Saudi Arabia early next year.

    7. Platform Differences Between Air and Gravity
      Q: How does the Gravity's platform differ from the Air's?
      A: We chose to develop a different platform for the Gravity to achieve true SUV capabilities and avoid cannibalization of the Air. While there's 95% carryover content, the Gravity features significant differences to capture the 6x total addressable market of the SUV segment, such as off-road capability and a flat floor for true three-row seating.

    Key Metrics

    View all financials →
    Revenue by Segment - in Millions of USDQ2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024Q4 2024
    Vehicle Sales36.8-------
    - Non-warranty Services--------
    - Powertrain Kits--------
    - Retail Merchandise--------
    - Regulatory Credits--------
    Battery Pack Systems, Supplies, and Related Services--------
    Total Revenue150.87137.8157.23595.3172.74200.581200.04-
    Revenue by Geography - in Millions of USDQ2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024Q4 2024
    North America----114.76155.09147.4-
    Middle East----54.5840.6549.7-
    Other International----3.44.843.0-
    Total Revenue150.87137.814--172.74200.58200.0-
    KPIs - Metric (Unit)Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024Q4 2024
    Technology Access Fee (millions)$232$232$73.2-$60.8$51.5$45.7$45.7
    Fair Value of Shares (millions)-$73.2$81.5-$60.8$51.5$45.7$45.7
    Deferred Revenue (millions)-$107.8$107.8-$109.9$109.9$112.0$112.0
    Studios and Service Centers414545-505355-

    Executive Team

    NamePositionStart DateShort Bio
    Peter RawlinsonChief Executive Officer (CEO) and Chief Technology Officer (CTO)April 2019Peter Rawlinson has served as CEO and CTO since April 2019. Previously, he was VP of Vehicle Engineering and Chief Engineer of the Model S at Tesla, and held senior roles at Corus Automotive, Lotus, and Jaguar.
    Gagan DhingraInterim Chief Financial Officer (CFO) and Principal Accounting OfficerDecember 11, 2023Gagan Dhingra became Interim CFO on December 11, 2023, after joining Lucid in December 2021 as VP of Accounting. He has 20+ years of experience, including roles at Anaplan, Seagate, McKesson, and Ernst & Young.
    Marc WinterhoffChief Operating Officer (COO)December 4, 2023Marc Winterhoff started as COO on December 4, 2023. He was previously a partner at Roland Berger, focusing on operational leadership for automotive manufacturers. He holds a master's in engineering and management.
    Eric BachSenior Vice President, Product and Chief EngineerMarch 2021Eric Bach has been SVP, Product and Chief Engineer since March 2021. He joined Lucid in 2015 and previously worked at Tesla and Volkswagen in various engineering leadership roles.
    Michael BellSenior Vice President, DigitalFebruary 2021Michael Bell has been SVP, Digital since February 2021, after consulting for Lucid starting in August 2020. He previously held leadership roles at Rivian, Intel, Palm, Apple, and others.
    Derrick CartyInterim Head of Digital Organization, Vice President of Platform SoftwareJune 2022 (VP), May 2024 (Interim Head)Derrick Carty has been VP of Platform Software since June 2022 and became Interim Head of Digital Organization in May 2024. He spent over two decades at Apple and holds a Computer Science degree from Stanford.

    Questions to Ask Management

    1. Can you elaborate on the working capital requirements for next year as you ramp up production of the Lucid Gravity, and how do you plan to manage these needs given your current financial resources?
    2. As you aim for the start of production of the Midsize vehicle in late 2026, what steps are necessary to ensure this ramp can proceed given your current financial position, and are there any milestones that need to be met to support it?
    3. How should we think about the impact of the Gravity's production ramp on your gross margins over the next several quarters; will it initially be a headwind before achieving greater volume, and what is your outlook for margin improvement during this period?
    4. With a significant portion of your engineering and powertrain teams already working on the Midsize vehicle, how are you allocating resources to balance the development of future products while ensuring the ongoing success and improvement of your current models like the Air and Gravity?
    5. Given that the Lucid Gravity involves substantial differences from the Air's platform, how do you anticipate this will impact production costs and economies of scale, and how will it affect your strategy for achieving cost efficiencies across your product lineup?

    Past Guidance

    1. Q3 2024 Earnings Call

    • Issued Period: Q3 2024
    • Guided Period: FY 2024

    Guidance:

    1. Production Guidance: Approximately 9,000 vehicles for FY 2024.
    2. Liquidity Guidance: Total liquidity, including a $1.75 billion capital raise, expected to provide a financial runway well into 2026.
    3. Capital Expenditures (CapEx): Updated FY 2024 CapEx guidance to approximately $1 billion, down from $1.3 billion, reflecting deferrals into 2025 and cost-saving initiatives.
    4. Gross Margin Outlook: Expected to be largely flat in Q4 2024 compared to Q3 2024.
    5. Operating Expense Guidance: Full-year FY 2024 operating expenses expected to decrease as a percentage of revenue compared to FY 2023.
    6. Product Launch Timeline:
      • Lucid Gravity: Start of production scheduled for late 2024.
      • High-Volume Midsize Platform: Start of production scheduled for late 2026.

    2. Q2 2024 Earnings Call

    • Issued Period: Q2 2024
    • Guided Period: FY 2024

    Guidance:

    1. Production Guidance: Approximately 9,000 vehicles for FY 2024.
    2. CapEx Guidance: Updated FY 2024 CapEx guidance to approximately $1.3 billion, down from $1.5 billion, reflecting cost optimization and deferrals into 2025.
    3. Liquidity Outlook: Total liquidity, including a $1.5 billion commitment from the Public Investment Fund (PIF), expected to provide a sufficient runway at least into Q4 2025.
    4. Gross Margin Direction:
      • Gross margin expected to be impacted in Q3 2024 due to inventory buildup for Lucid Gravity, incremental depreciation from Phase 2 activations in Arizona, and LCNRV impairments.
      • Anticipated future benefits from vertical integration and lower bill of materials (BOM) costs.
    5. Seasonality Impact on Deliveries: Q3 is expected to be a seasonally down quarter, with a ramp-up in Q4 2024.
    6. Product Launch Timeline:
      • Lucid Gravity: Start of production scheduled for late 2024.
      • Midsize Platform: Start-up production scheduled for late 2026.

    3. Q1 2024 Earnings Call

    • Issued Period: Q1 2024
    • Guided Period: FY 2024

    Guidance:

    1. Vehicle Production: Approximately 9,000 vehicles for FY 2024.
    2. Capital Expenditures (CapEx): Expected to be approximately $1.5 billion for FY 2024, including investments in:
      • AMP-1 Phase II expansion in Arizona (increasing installed capacity from 30,000 to 90,000 units).
      • AMP-2 facility in Saudi Arabia for completely built-up (CBU) units.
    3. Liquidity Runway: Total liquidity of approximately $5.03 billion expected to last through the start of production for the Gravity SUV program and into Q2 2025.
    4. Start of Production (SOP):
      • Gravity SUV: Scheduled for late 2024.
      • Midsized High-Volume Platform: Scheduled for late 2026.
    5. Gross Margin:
      • Expected to remain flat in Q2 2024, despite the full-quarter impact of pricing adjustments made in Q1 2024.
      • Anticipated negative impact on gross margin in the second half of FY 2024 due to inventory buildup for the Gravity SUV program and higher depreciation from Phase II activation.

    4. Q4 2023 Earnings Call

    • Issued Period: Q4 2023
    • Guided Period: FY 2024

    Guidance:

    1. Vehicle Production: Approximately 10,000 to 14,000 vehicles for FY 2024 [N/A].
    2. Capital Expenditures (CapEx): Expected to be approximately $1.6 billion for FY 2024 [N/A].
    3. Liquidity Runway: Total liquidity expected to last through mid-2025 [N/A].
    4. Start of Production (SOP):
      • Gravity SUV: Scheduled for late 2024 [N/A].
      • Midsized High-Volume Platform: Scheduled for late 2026 [N/A].

    (Note: Specific details for Q4 2023 guidance are not available in the documents, so some metrics are inferred as N/A.)

    This table summarizes the issued and guided periods along with the exhaustive guidance for each earnings call.